It is a long time since a British Budget has been worth writing about. We believe yesterday’s Budget was genuinely surprising and as radical as anything we have seen in the last 20 years. Amongst the welcome mundanity of a cut in beer and bingo tax and the spin on fiscal normalisation and budgetary control the plan to revolutionise the UK savings market, in time, could have a hugely positive impact on UK personal wealth and to a lesser extent GDP growth. Please contact us for a copy of the report.
One of the key drivers of equity markets has been the search for income generating assets. As perceived systemic risk has reduced, investors cognisant of the derisory ‘risk free’ yields on offer, have sought to preserve the value of their investments by searching for alternative income yielding assets with equities being a prime beneficiary.
We have published a note today looking at the investment implications that may arise should Scotland leave the UK. In a nutshell the financial risk lies predominantly with Scotland dependent largely on number of key unresolved factors; notably how the national debt and oil revenues are split. The nature of the final negotiations would largely determine the viability, or otherwise, of Scotland.
We remain positive on the prospects for capital appreciation for UK equities for a sixth consecutive year setting a FTSE 100 target of 8000. We believe that Anglo Saxon risk is back to pre crisis lows and while the UK recovery is unbalanced the extremity of monetary policy is likely to continue to agitate growth and may indeed lead to bubbles re-developing in certain asset classes, notably real estate. We believe US recovery is more balanced and sustainable relative to the UK. European recovery we believe will prove illusive in 2014.
Walbrook Economics today spoke at the Institute of Economic Affairs Pre- Autumn Statement Briefing. Out theme was that with GDP growth likely to reach 3% in 2014 tax receipts were on a strong upward projectory. While growth remained unbalanced tax receipts were up 8.2%, over the last 6 months with public spending constrained to a 2.3% rise. The OBR's deficit projections of £119bn, for the current fiscal year, were likely to under-shoot by £15bn with a greater reduction likely in 2014/15. Modest tax cuts should be expected in the current year with greater reductions expected in 2014/15.